Blog Post

Klabin SA 3Q16 market overview: “lackluster hardwood pulp prices”

(Sao Paulo, Brazil, October 27, 2016) 3Q16 HIGHLIGHTS:• Paper and packaging sales volume amounted to 472 thousand tonnes, a 2% increase in relation to 3Q15 and 5% in relation to 2Q16. On the back of FX rate changes during the quarter, paper and packaging sales to the domestic market increased 4% in relation to 2Q16.• Since start-up in March, pulp sales from the new Puma Unit in the city of Ortigueira (PR), continued to develop, totaling 315 thousand tonnes, a 74% increase in relation to 2Q16.• Net revenues totaled R$1,965 million in the quarter, a 36% growth in relation to the same period in 2015, mainly due to pulp sales.• 3Q16 Adjusted EBITDA reached R$585 million, a 13% increase when compared to 3Q15. Adjusted EBITDA for the first 9M16 totaled R$1,635 million, 19% above 9M15.• Klabin finalized the acquisition of industrial assets for the production of corrugated boxes of the company Hevi, in Manaus (AM) in September, and in October, Embalplan, another converter based in Rio Negro (PR), boosting production capacity by 10%.Market Overview:
The third quarter of 2016 confirmed changes already anticipated in the in the Federal government with important consequences for the economy. The most important stemming from the change in economic outlook was the maintenance of the FX rate at lower levels and the appreciation of the Ibovespa, which after two years reached the 60,000-point mark.
Despite the improvement in confidence, economic activity indicators continue to stagnate.
Overseas, uncertainties surrounding an interest rate hike in the USA and the United Kingdom’s exit from the European Union persist. The Japanese government, threatened by low growth rates and deflation, approved a stimulus program in an effort to rekindle the country’s economy.
In the paper and packaging markets, according to data published by the Brazilian Corrugated Board Association (ABPO), after a 6% fall in corrugated box shipments during the first quarter of 2016 in relation to 1Q15, the second and third quarters recorded stability in relation to the same periods of 2015. The trend indicates an expected improvement in forthcoming periods in line with changing expectations for the Brazilian economy.
In relation to international packaging paper markets, European kraftliner prices continued under pressure, with FOEX average list prices at US$612/t, 2% and 7% lower than in 2Q16 and 3Q15, respectively. In the pulp market, hardwood pulp prices continued lackluster due to the prospects of new capacity coming on stream. Consequently, average FOEX prices in Europe decreased to US$671/t in 3Q16 from US$693/t in 2Q16. On the other hand, average softwood pulp prices increased to US$811/t from US$796/t, the spread at the end of the quarter between the two being US$148/t.
The Puma Unit, still at the ramp up stage, was responsible for the important increase in sales during the period, especially hardwood pulp. As a result, Klabin’s total sales volume reached 787 thousand tonnes in 3Q16, a year-on-year increase of 70%.To download complete report Go To:http://ri.klabin.com.br/enu/3229/Klabin%20Release%203Q16.pdf(Source: Klabin)Pictured Above: Klabin’s Puma Unit (the new pulp mill is coming up in Ortigueira, Paraná, for total investment of R$5.8 billion. The Puma Project will double Klabin’s production capacity by 2016)